Foreign project generates a negative cash flow

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Reference no: EM131343259

1. A foreign project generates a negative cash flow in year 1 and positive cash flows in years 2 through 5. The NPV for this project will be lower if the foreign currency in year 1 and in years 2 through 5.

depreciates; depreciates

appreciates; appreciates

depreciates; appreciates

appreciates; depreciates

2. When a U.S.-based MNC has a subsidiary in Mexico that needs financing, the MNC's exposure to exchange rate risk can be minimized if:

the parent issues dollar-denominated equity and provides the proceeds to the subsidiary.

the parent provides its retained earnings to the Mexican subsidiary.

the subsidiary obtains a dollar-denominated loan from a financial institution.

the subsidiary obtains a peso-denominated loan from a financial institution.

Reference no: EM131343259

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